Target Eyes FY26 as Turning Point on Investments in Tech & Remodels

Core Insights - Target Corporation (TGT) is positioning fiscal 2026 as a pivotal year, focusing on investments in its store fleet, digital capabilities, and operating model to enhance relevance and growth after years of fluctuating discretionary demand [1] Investment and Capital Expenditure - Capital spending is set to increase to approximately $5 billion in fiscal 2026, up from $4 billion in the current year, with funds allocated for technology upgrades, category resets, new larger-format stores, and an expanded remodel program [2] - Remodels are expected to drive reliable sales increases, while new stores are exceeding internal performance expectations [2] Technology and Modernization - Technology modernization is a key component of Target's turnaround strategy, utilizing machine learning and AI tools to enhance forecasting, inventory management, and personalization, resulting in a more than 150 basis points year-over-year improvement in the availability of top-selling SKUs [3][9] - The company plans its most significant store floor transformation in a decade, focusing on areas such as Home, Baby, Beauty, and Fun 101 to enhance customer experience and design-led merchandising [4] Organizational Changes - To support the new operational model, Target has reduced its headquarters staffing by approximately 1,800 roles, aiming to streamline decision-making and accelerate merchant workflows [5] Competitive Landscape - Target's stock has increased by 21.6% over the past three months, outperforming the industry growth of 9.5% [8] - The forward 12-month price-to-earnings ratio for TGT is 14.43, which is lower than the industry average of 31.94, indicating a potentially attractive valuation [10] Earnings Estimates - The Zacks Consensus Estimate for TGT's fiscal 2025 earnings suggests a year-over-year decline of 17.6%, while fiscal 2026 is projected to see a growth of 5.9% [12]